Co-operative Bank to Face High Court for Overcharging Customers

The Co-operative Bank is set to appear in High Court following an admission of overcharging fees to its customers, in violation of the Credit Contracts and Consumer Finance Act, according to the Commerce Commission Te Komihana Tauhokohoko. The bank charged excessive fees to approximately 48,249 customers, resulting in total refunds and compensation amounting to $7.2 million.

The issue came to light when the commission’s investigation revealed that the bank had imposed “unreasonable” fees across various loan types, including home loans, overdrafts, and personal loans, during the period from June 6, 2015 to November 30, 2021. The commission’s director for credit, Sarah Bartlett, emphasized the importance of holding financial institutions accountable, stating, “Charging unreasonable fees doesn’t just erode trust in the banking sector; it has a direct and tangible impact on consumers’ wallets, often hitting those least able to absorb unexpected costs.”

In response, Mark Wilkshire, the chief executive of Co-operative Bank, expressed regret over the bank’s historical practices. He noted that the bank had proactively identified the issue, self-reported it to the commission, and worked diligently to rectify the situation for both current and former customers. Wilkshire assured that the bank is in the final stages of remediation for all affected customers, reaffirming their commitment to improving their service.

The commission had initiated its investigation in 2023 after the bank raised concerns regarding its fee structure. This increased scrutiny follows a broader initiative started in 2018 by the Financial Markets Authority Te Mana Tātai Hokohoko and the Reserve Bank Te Pūtea Matua, encouraging banks and insurers to notify regulators about any legal breaches or overcharges.

Bartlett highlighted that several banks, including ASB, ANZ, Westpac, Kiwibank, IAG, Tower, and AA Insurance, have taken similar actions in response to regulatory pressure. She remarked, “Co-operative Bank’s conduct fell short of what we would expect from a responsible lender,” noting that the bank failed to conduct regular fee reviews and lacked adequate systems to ensure compliance.

As the High Court hearing approaches, it will determine the appropriate pecuniary penalty for the bank’s actions. Wilkshire mentioned that the bank had previously accounted for potential penalties, indicating that any financial implications are not expected to affect the bank’s results for the fiscal year ending March 31, 2026.

The outcome of this case could have significant implications for consumer trust and regulatory practices within the banking sector, showcasing the ongoing need for transparency and accountability in financial services.